Legacy Automakers Struggle with Short-Term Thinking While Newcomers Thrive in EV Market

Recently, traditional automakers like Ford and GM have faced significant challenges in the electric vehicle (EV) market. Ford is scaling back on its plans for new EV models, including a much-anticipated three-row SUV, choosing instead to focus on hybrid vehicles. Meanwhile, GM is grappling with software development issues, leading to the layoff of 1,000 developers who struggled to adapt to the company’s established corporate culture. These moves have raised questions about why these established automakers are stumbling in a market where newcomers like Tesla and Rivian are finding success.

While companies like Ford and GM might argue that the complexities of developing EVs and the associated software are to blame for their struggles, their difficulties seem to stem more from outdated corporate cultures and short-term thinking. Newer companies, which are less burdened by legacy practices, are successfully innovating and adapting to the demands of the rapidly evolving EV market.

Ford’s EV Setback Disaster

I sort of think of the EV AUTO ‘revolution’ the same way I consider GENDER IDEOLOGY. A 10 year long April Fools joke…and so many have been had🤨⁦@Ford⁩ ⁦@GM⁩

But not ⁦@ToyotaMotorCorp⁩ 😁 https://t.co/VEaxYR3Xoj

— Our ‘Pride’ Colors=Red/White/Blue 🇺🇸🇬🇧🇮🇱 (@LgbPatriots) August 25, 2024

One major issue for legacy automakers is their reliance on outdated corporate strategies that prioritize short-term gains over long-term stability and innovation. A significant influence on this mindset is the legacy of Jack Welch, the former CEO of General Electric, whose management philosophies have deeply impacted corporate America. Welch championed practices such as frequent layoffs, aggressive deal-making, and financialization—strategies that may have boosted short-term profitability but ultimately undermined long-term sustainability.

Welch introduced the idea that regular layoffs, even during profitable periods, could streamline operations and improve bottom lines. While this practice might have made GE appear leaner and more efficient, it destabilized the workforce and contributed to a broader decline in the American industrial base. Furthermore, Welch’s focus on mergers and acquisitions often reduced competition and weakened the overall market environment.

Financialization, or the shift from industrial production to financial services and other non-core activities, also took its toll. GE’s foray into unregulated banking and risky financial products contributed to the company’s decline, particularly during the 2008 financial crisis. This focus on financial metrics over sustainable business practices led to significant long-term consequences, including increased income inequality and reduced employee wages.

The decline of companies adhering to Welchian principles suggests a need for a strategic shift. Instead of focusing solely on shareholders and quarterly earnings, companies should adopt a broader perspective that considers the well-being of all stakeholders, including employees, local communities, and the environment. A sustainable approach would prioritize long-term growth and stability over short-term gains, ensuring the company’s viability for decades to come.

For automakers, this means committing fully to the transition to EVs rather than retreating to hybrids and plug-in hybrid electric vehicles (PHEVs) as a temporary solution. While this strategy might seem safer in the short term, it risks falling behind competitors who are fully invested in the future of EV technology. If European and Asian automakers continue to lead in EV development, companies like GM and Ford may find themselves outpaced and outmaneuvered.

GM and Ford to Report Lower Profits Amid EV Struggles https://t.co/HVDLPFrC5i

— COINTURK FINANCE (@cointurkfinance) July 22, 2024

Short-term thinking not only jeopardizes the future of individual companies but also has broader implications for the industries and countries in which they operate. The decline of the American industrial base and the environmental degradation caused by such practices harm everyone, including shareholders. A more balanced approach that values long-term sustainability and competitiveness would better serve both companies and their investors.

Moreover, automakers should avoid becoming entangled in political maneuvering that seeks short-term regulatory or financial favors at the expense of a fair and competitive market. Instead, companies should focus on fostering innovation and competitiveness, which will benefit them in the long run.

Key Points:

i. Legacy automakers like Ford and GM are facing challenges in the EV market due to outdated corporate strategies and short-term thinking.

ii. Jack Welch’s management style, which emphasized layoffs, mergers, and financialization, has had long-term negative effects on the American industrial base.

iii. Newcomer companies like Tesla and Rivian thrive by focusing on innovation and long-term growth rather than short-term financial gains.

iv. Automakers need to consider the well-being of all stakeholders, including employees, communities, and the environment, for sustainable success.

v. Avoiding short-term political maneuvering and focusing on competitiveness and innovation is crucial for legacy automakers to thrive in the future.

Al Santana – Reprinted with permission of Whatfinger News